Credit Reporting Errors Lead Consumer Complaints, CFPB Says
False information on credit reports maintained by the nation’s biggest rating companies is the No. 1 complaint from consumers to the Consumer Financial Protection Bureau, the government watchdog said in a report last week.
Less than 2% of requests to correct errors on consumer records maintained by Equifax, Experian, and TransUnion resulted in corrections in 2020, down from 25% in 2019, the CFPB said in the report. The federal agency received 700,000 complaints about the three largest credit bureaus between January 2020 and September 2021, accounting for more than half of all the consumer complaints submitted for the period, the CFPB report said.
“America’s credit reporting oligopoly has little incentive to treat consumers fairly when their credit reports have errors,” said CFPB Director Rohit Chopra. The report “is further evidence of the serious harms stemming from their faulty financial surveillance business model,” he said.
More than 200 million Americans have credit files, and lenders rely on this information to decide whether to approve loans and on what terms, the report said. The information is also used for decisions about employment, insurance, housing, and the agreement to provide utilities such as electricity or internet, the CFPB said.
“For consumers, inaccuracies on credit reports drive up the cost of credit and severely limit opportunities, such as starting a small business or buying a new home,” the report said.
Medical bills were one of the leading problems, the CFPB said.
"One of the main sources of consumer debt that can lead to consumer reporting inaccuracies and mistakes is medical bills,” the report said. “Consumers find that opaque pricing, the complex system of insurance coverage, and frequent delays in consumers finally receiving bills create an unnavigable quagmire and can make it harder to resolve billing errors.”
Consumer complaints often stated that inaccurate information was being wrongly linked to their names through either mistaken identity or identity theft, the CFPB said.
The nation’s three leading credit reporting companies often failed to provide responses using the reason that the complaints were sent in by third parties, the report said, while noting that consumers are allowed by law to authorize third-party representatives to submit complaints on their behalf.
"The Fair Credit Reporting Act requires Equifax, Experian, and TransUnion to conduct a review of complaints sent to them through the CFPB where consumers allege there is incomplete or inaccurate information in their consumer reports and the consumer appears to have previously attempted to fix the problem with the company,” the report said. “The companies must then report their determinations and actions for these covered complaints to the CFPB.”
Representatives of the three major reporting bureaus did not respond to a request for comment.
Kathleen Howley has more than 20 years of experience reporting on the housing and mortgage markets for Bloomberg, Forbes and HousingWire. She earned the Gerald Loeb Award for Distinguished Business and Financial Journalism in 2008 for coverage of the financial crisis, plus awards from the New York Press Club and National Association of Real Estate Editors. She holds a degree in journalism from the University of Massachusetts, Amherst.